FHFA will still loan to the poor

WASHINGTON -- Fannie Mae and Freddie Mac would maintain current levels of home-mortgage purchases meant to spur lending to lower-income borrowers though 2017 under a proposal released by the Federal Housing Finance Agency.

FHFA, the government overseer for the U.S.-owned mortgage giants, said Tuesday it is seeking public feedback on a plan that would keep lending to poorer families at about 23 percent of the companies’ book of business for the next three years.

The agency proposed changes in the way the percentage is calculated.

The proposal is an indication that FHFA Director Melvin L. Watt, who took the helm eight months ago, won’t dramatically reshape the role the companies play in aiding low-income families.

Edward J. DeMarco, who preceded Watt as director, drew criticism from housing advocates for focusing on shrinking the companies instead of providing aid for struggling borrowers.

Lending to very poor families would also stay at current levels, about 7 percent, “to encourage Fannie Mae and Freddie Mac to propose safe and sound lending to lower-income borrowers,” FHFA said.

Fannie Mae and Freddie Mac, which have operated under U.S. conservatorship since 2008, provide liquidity to the housing market by buying loans and packaging them into bonds on which payments of principal and interest are guaranteed.

The so-called affordable housing goals, which have been in place since 1992, are intended to spur mortgage lending in economically disadvantaged neighborhoods.

The practice of requiring Fannie Mae and Freddie Mac to purchase an increasing percentage of loans in poor communities became a political flash point after the housing bubble burst.

By 2007, loans to low- and moderate-income borrowers were 55 percent of the companies’ books.

Republicans and free-market advocates said the goals fueled a decline in lending standards because Fannie Mae and Freddie Mac were forced to buy increasingly risky mortgages.

Civil-rights groups and consumer organizations including the National Association for the Advancement of Colored People and the National Community Reinvestment Coalition say subprime lenders, not affordable-housing goals, were to blame.

Without a mandate, these groups say, disadvantaged buyers could be shut out of the market, hurting the broader economy.